US Energy Policy: Why It Failed & How To Fix It

One of the biggest drains on the American economy is, undoubtedly the importation of energy. In the early 1970’s the United States was the world’s largest producer of Oil and Natural Gas. If we still remain near the top of the world’s list of producers – #3 according to the CIA Fact Book – how is this a problem? The problem is that we are the world’s #1 Importer of oil at 10.27 Million BBL/Day – which is 4.541 Million barrels per day higher than China, who stands as the #2 importer.

What about natural gas? Surely we recover the losses, right? Not so fast. The US is still the world’s #1 producer of Natural gas. But here’s he problem – we are also the worlds #1 consumer AND importer of Natural Gas. Once again, we are in an upside-down scenario in regards to energy.

US Oil Production, by year

How can a country, much less an economy, expect to sustain stability, strength or longevity with such a huge disparity when it comes to such a valuable and important commodity?

.

WHERE GOVERNMENT FAILED

It is my firm belief that our current economic tensions with the Middle East and OPEC began with the “oil policy” of President Jimmy Carter when he signed Presidential Directive 63 on January 15th, 1981. PD63 stated that the US will protect its interests in the Middle East “by any means necessary, including military force.”

Also under the Carter Administration, the US Department Of Energy was created (in 1977). Since then, Congress has passed a swath of energy-focused legislation that was supposed to make our nation more energy efficient, independent, and strong. A very small sampling of legislation are as follows:

1978 – Power Plant and Industrial Fuel Use Act – Restricted new power plants using oil or natural gas. Repealed in 1987.

Furthermore, the federal government has spent Billions of dollars – if not Trillions – over the last three decades fighting wars in the Middle East to “protect our interests” in their oil. Imagine the infrastructure that could have been built in America for alternative fuels, solar energy, hydroelectric power, bio-fuels, and more. Perhaps American energy independence wouldn’t be a mere policy and plan – but instead a reality.

As time progresses, it is becoming more and more apparent that Congress continues to extend the present energy crisis (yes, crisis) in this country. In doing so, they are also expanding our National Debt with the growing protection of and importation of foreign fuel sources. Let’s not forget how much influence has been bought with money from the oil industry. Oil & gas companies have donated huge sums of money to politicians to maintain the energy status quo:

The answer to many problems is often right under your nose – American Energy is no different. We must look South to Brazil. The Brazilian model for energy independence is showing gigantic signs of success. Brazil is producing more energy than it consumes, and, according to one Brazilian energy mogul, 48% of Brazil’s current energy comes from renewable sources.

The following charts show clear evidence that the Brazilian model is working:

Click for larger view

WHAT SHOULD THE US GOVERNMENT DO?

The first step in reversing our current failed energy policy is to eliminate and remove ALL subsidies for corn-based ethanol production. The use of corn-based ethanol has an effect on food prices, not just in the US, but globally. Corn is a valuable commodity as a food product, and should remain a staple in that regard.

One suitable alternative to corn is sugarcane – as Brazil is showing – but there are many more options available including bagasse, miscanthus, sugar beet, sorghum, grain, switchgrass, barley, hemp, kenaf, potatoes, sweet potatoes, cassava, sunflower, fruit, molasses, corn, stover, grain, wheat, straw, cotton, and more. Surely with the variety of crops from which ethanol can be derived, corn can be replaced, subsidies eliminated or reduced, and the United States can begin to produce vast amounts of Ethanol to ease our dependence on foreign oil.

Even another alternative to crop-based ethanol is Algae. It is being shown that Algae can produce ethanol with a greater yield and efficiency over corn and even sugar cane:

Algae produces more Ethanol per acre than Corn or Sugar Cane

Algenol’s process is very different in that the algae are not cultivated. Instead, algae produce ethanol in gas form that is siphoned off from the bioreactor tubes and condensed to a liquid, Woods explained.

He claimed that the system can produce 6,000 gallons of ethanol per acre per year, far more than corn’s rate of 370 gallons per acre per year or sugar cane’s at 890 gallons per acre per year.

The Mexican site is located a few miles away from a power generation station. By pumping carbon dioxide from the station into the algae bioreactors, the saltwater algae farm can boost production to 10,000 gallons of ethanol per acre per year, he said.

Exploring these alternatives are the first step in eliminating our dependence on oil imports. The second step is domestic Oil Production. Yes, that old saying “Drill, baby drill!” is coming back. The United States has 20.68 BILLION barrels of proven oil reserves. We also have 7.716 Trillion Cubic Meters of Natural Gas reserves under our boots.

With our proven energy reserves, and the massive potential for ethanol, hydroelectric, and other renewable sources – what logical reason is there for the US to NOT be energy independent by 2020? Diversifying our energy sources is not only good for National Security, it is sound economics and it will create JOBS for Americans. Couple this energy policy with real, logical tax reform (I personally support The Fair Tax), and the United States would lure back manufacturing and other sectors in massive droves. This would lead to the USA becoming the economic hub of the world once again.

Bottom line: A sound policy geared towards Energy Independence will affect the entire US Economy. A strong economy makes a strong country. So in 2012, let’s elect members of Congress who will seriously approach US Energy Policy. Vote for prosperity, not party.

3 comments

TJ, you have made it a lot easier for the average person to understand what people actually mean by the phrase “comprehensive energy policy” here. While the Algae biofuel has huge potential, considering that it has been in development for 35 years, according to a NY Times piece,Algae biofuel is still a long ways from a safe development that won’t pose a risk to environmental balance. Check out the Times article : http://www.nytimes.com/2010/07/26/business/energy-environment/26algae.html?pagewanted=2

Interesting stuff there for sure. Algae in the oceans supply the world with about 40% of the oxygen we breathe. Upset the natural balance, and the global warming alarmists won’t have to worry about the earth’s rising temp-as huge portions of the pop. will die off long before then. The old saying “you can’t fool mother nature” comes to mind there.

Also, “proven oil reserves” have been pointed to as a false way of manipulating fossil fuel suppplies worldwide, as Bill Kovarik points out here:

Ever since the world’s first commercial oil wells opened in the US and Russia in the 1850s, the question of future oil supply has been controversial.

Today many people take for granted that oil production has peaked and that no substantial new amounts of oil are even possible to develop.

These pages present a contrary view based on the idea that oil reserve figures have not been presented honestly by the US and European oil industry. This is not to say that oil won’t run out some day, but rather that the usually uncounted reserves are far larger than are generally known.

Great charts in that piece that help folks understand the difference between “proven oil reserves” and the USGS studies. As Standard Oil executive Wallace Pratt said in 1944, it is a “fallacy … [to] cite proved reserves as a measure of available future supplies.” Yet this is exactly what has animated US policy in the Middle East. A stifling game of world politics is being played there, concerning the actual amount of world oil reserves, especially those located in the United States.

Clean energy is a must, as is energy conservation for the betterment of society worldwide. Everyone agrees on that principle. However, we can not let our government control the energy sector. This needs to be done 100% by the private sector, to ensure vigorous competition and enhanced prosperity through true capitalism. The government has never created a thing, a viable product, an invention, a profitable company, nothing.. except the current $15 trillion dollars of debt. When it comes to cost efficiency, the private sector succeeds based on profit-driven competition, while the government fails miserably.